Silver Ridge Resources says OPEC’s decision to maintain output will help keep the crude oil market oversupplied for some time.
According to Silver Ridge Resources, the Organization of Petroleum Exporting Countries’ (OPEC) decision to leave crude oil output unchanged will almost certainly ensure the market remains oversupplied and exert downward pressure on prices.
The well-aired theory that the cartel is maintaining high output in order to put high-cost US shale oil producers under pressure may be looking less plausible than it was 6 months ago said Vivian Ericsson, chief commodities and resources researcher at Silver Ridge Resources.
“Certainly, OPEC’s strategy has resulted in the closure of hundreds shale of oil drilling rigs over the last year but overall US production has remained largely unchanged, a fact that highlights the scale of the efficiency improvements being made within fracking technology,” she added.
Oil prices have staged a relief rally since hitting lows of $46 in January and have recovered to the $60 a barrel level but Silver Ridge Resources believes downward pressure on prices could be set to resume after data emerged showing that fuel imports into China, the world’s biggest net oil importer, fell by a quarter in May compared with April and evidence showing that higher prices will result in an increase in US drilling in the second half of the year.
“One month’s Chinese fuel import data and the outside chance of a small increase in US drilling in the 3rd and 4th quarters aren’t nearly as bearish for oil prices as OPEC’s policy of keeping the spigot open for longer,” explained Ericsson.
Silver Ridge Resources says the OPEC decision hasn’t changed its $65 a barrel price target for crude oil by year’s end.
About Silver Ridge Resources:
Founded in 2005, Silver Ridge Resources is an independent, full-service brokerage, investment planning and management concern committed to delivering innovative capital appreciation and preservation solutions to individuals and families with a high net worth. We place the welfare of our clients and their families first and we pride ourselves on having become the first port of call for their financial affairs. We consistently exceed our clients’ expectations by going the extra mile in terms of attention to detail, delivery of service and, most importantly, returns on investment.
From our headquarters in Shanghai, China and offices around the Asia Pacific region, we currently oversee the deployment of over $4.5 billion of assets on behalf of clients both in Asia and around the world.
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